Overall, I am very comfortable with your asset allocation. My personal preference is to have 50% of my fixed income in inflation bonds, with the other 50% in regular bonds. Thus, if I were in your shoes I would have a bit more in inflation bonds (in your rollover IRA). I don't think your 0.5% in REIT is enough to matter, so I might up that to 5%.

Your desire to withdraw $36,000 is probably safe. At your age, you should probably begin your withdrawals at less than 4% of the portfolio. But if your portfolio is over $1 million at retirement I would think your risk is quite low.

I don't think you are too conservative. You don't have any need to take more risk. In fact, you could probably take less.

1) How did you end up with taxable bonds in your taxable account? Can you get rid of those without taking a tax hit? In the 28% tax bracket, you should not buy any more taxable bonds in that account.

2) In the 28% tax bracket, you should probably be using traditional 401k instead of Roth 401k.

3) Annuities (other than SPIAs) are not well loved around here. Fees are often quite high. You might not want to purchase any more.

4) I think there is a good possibility you make too much money to contribute directly to Roth IRA. But the person with the Rollover IRA is not a good candidate to use the back door. What are your plans in that area?

1) How did you end up with taxable bonds in your taxable account? I had read on this site that someone used the short term bond fund for an emergency fund, as the interest was generally higher than CDs and Money Markets. That was what I had used this for. I don't really need it now that I have built up more cash.

Can you get rid of those without taking a tax hit? Not sure. Perhaps someone else could help answer this.

In the 28% tax bracket, you should not buy any more taxable bonds in that account. Understood.

2) In the 28% tax bracket, you should probably be using traditional 401k instead of Roth 401k. I can change the future investments to a traditional 401K.

3) Annuities (other than SPIAs) are not well loved around here. Fees are often quite high. You might not want to purchase any more. Understood.

4) I think there is a good possibility you make too much money to contribute directly to Roth IRA. But the person with the Rollover IRA is not a good candidate to use the back door. What are your plans in that area? I do make too much to contribute to a Roth IRA and have no plans to convert the Rollover IRA.

2muchfun wrote:Can you get rid of those without taking a tax hit? Not sure. Perhaps someone else could help answer this.

Do you have much of a capital gain in this fund? If yes, you might want to keep it so you don't have to pay capital gains taxes triggered if you sell it. If you have little or no gain, you might want to sell it and use a tax-exempt bond instead.

Other than the bond fund in your taxable, which has been addressed, I think you are doing fine. Once you do retire you should take a look at your overall marginal tax bracket. In your years of retirement prior to drawing SS you might consider doing Roth conversions at least up to the top of the 15% bracket. If you are withdrawing from taxable in the early years of retirement you might be in a very low tax bracket.

If none of those gains have been taxed so far (some probably have in the form of dividends) and if the gains are long term, it will cost you $225 in federal taxes to get rid of that fund. This would eliminate the dividends you pay tax on (but don't actually spend) each year. You could replace that fund with a tax-exempt bond fund which won't cost you much (or anything) in taxes each year. If your state has a tax-exempt fund, you would get out of state taxes too.

You've got a lot of little extras that people here would probably not suggest (individual stocks, annuities, Nuveen Real Estate, long term bonds), but all in all, they are small portions and the bulk of your portfolio is just the basics.

If you want to list the things available in your new 401k, it is possible something better could be chosen there.

This is rather incongruent to the marginal income tax bracket of 28%, the annual investment contributions of $85,000, and the low-7-figure size of the portfolio. It doesn't make sense to me unless there is a pension or sugardaddy or severe austerity program involved. Would you care to explain?

I don't believe the Nuveen Real Estate fund is your best choice. You didn't list the expense ratio, but for retail customers, it is high - 1.04% A better choice for a stock fund in your 401k would be 80% Vanguard 500 Index Signal combined with 20% Vanguard Small Cap Index Signal to give you something near total Stock Market. The expense ratios of those two funds should be significantly lower.

For the bond fund, ordinarily we don't suggest long term bonds much. But if it is the lowest expense ratio fund in the pack, it might be your best choice. Or possibly combining it with the PIMCO Low Duration fund. But you'd need to give us the expense ratios of these funds to really know for sure. Not knowing any other info, I'd use half Vanguard long term and half PIMCO low duration to give you something similar to an intermediate bond fund.

Which ones and how many you use is pretty much personal preference. Do you want to use 2 funds (500 and Small cap) or 3 funds (500 and mid and small cap) to get something close to total stock market? Ignore this - when I got to the contributions, I found that all of your 401k needs to go to bonds.

For the bonds, the VG long term is the best cost, but I'm not fond of long term bonds, so I'd temper that by mixing it half and half with the PIMCO Low Duration bond.

I moved things around to the order I'm accustomed to (so I can find things easily) and this is what you currently have (other than I exchanged the Nuveen Real Estate into the Vanguard long term bonds in the 401k).

New annual Contributions = $85,000$23,000 his 401k <---all to bonds, however you want to split it$6,500 his IRA/Roth IRA <--all to bonds$5,500 her IRA/Roth IRA <-all to bonds$50,000 taxable (for retirement, not short term goals) <---$14k to Total International, $36k to Total Stock Market although some of this might have to go into a muni bond fund to keep your bond ratio up to target

Next year (2014) you will almost certainly have to put some of the $50k going into the taxable account into a muni (tax-exempt) bond fund.

2muchfun wrote:I would like to ask why you are not fond of long term bonds. At a cursory glance, the expenses seem to be lower and the returns higher than the PIMCO bond fund.

When/if interest rates go up, long term bond funds will lose more value (per share) than intermediate term and short term bonds. It is just the way bonds work. But eventually, part of that will be made up by the fact that what the bonds pay will go up along with the interest rates.

For that reason (greater loss in value), it is generally suggested to keep your bond funds in the intermediate range for long term investing rather than in the long term range. Some money in long term bond funds is not a problem, but I would not hold a significant portion of my bonds in a long term fund. That's why I suggested "tempering" the long term fund with the PIMCO fund.

Example: the "duration" of Vanguard's Long Term bond fund is about 15 years. If interest rates go up 1%, the value of the bond holding will go down 15% (say, from $100k to $85k). If interest rates go up another 1%, the value of the bond holding will go down another 15%. Those are pretty big drops for a bond fund- which is why many people here avoid putting a lot of money there.

On the other hand, it appears you may retire before interest rates go up significantly, so it might be OK to use the long term bond fund for a couple of years - you might "get away" with it.

I suppose this is one reason why the long term bond fund is rated at a 3 on their risk scale, while the intermediate term bonds seem to be rated at about 2. You want to be taking your risk on the stock side of the portfolio, not the bond side.

Another option would be to use some shorter term bonds in another account.

I am with a new employer and their 401K bond selection expense ratios seem high. Do you have a suggested fund(s) below that I should invest in, or am I better off investing through Vanguard outside of the 401K, given the costs?

Ready to retire! Thank you in advance for reviewing my portfolio and making recommendations. In 2010 and 18 months ago, you made some suggestions and I modified my portfolio. I will retire in 30 days. I am looking for some advice on how I look for this and whether I need to tweak anything.

Unless I added wrong, you are low on the bond side. You could exchange the TSM in the Rollover IRA to bonds to almost get to target. And your international is not up to 1/3rd of your stocks - at this point, the best solution for that is not evident.

What is the Real Estate Investment in the taxable account? If that is your home, people usually don't include real property in an asset allocation, although it is included in your net worth.

2. Should I start withdrawals from any particular fund in the taxable account or move some of the funds to a money market account and withdrawal from that?

Opinions vary on whether to hold some money in money market or other kinds of cash. And you do have about $60k in cash right now. Some people like to have a certain amount of cash in the mix just to make withdrawals easy.

Some people like to have a lot of money in cash. The most extreme I recall is holding 7 years of expenses in cash - to see you through a complete crash and recovery. I decided against that because that means a lot of money is not "working" for me forever. I'd rather have the money in the market.

Do whatever feels comfortable for you and let your experiences guide you about whether you continue or not.

About what to draw from first - probably the total stock market or the individual stock - just to reduce your stock allocation and to help increase the percentage of international toward your goal.

About "fixing" your low percentage of international - if you should fall into the 15% tax bracket next year, you could sell some long term gains in the total stock and buy total international. Long term gains are taxed at 0% in the 15% bracket.

Are you considering converting tIRA to Roth IRA? Since you are not drawing SS yet and if you drop into the 15% bracket, you could convert some each year - up to the top of the 15% bracket. This would not cost a great deal in taxes and will reduce your RMDs when the time comes.

Is $36k withdrawal still your plan for 2015?

What do you plan to do with the annuities?

Have you seen livesoft's threads on how to be very rich and not pay a lot in tax?

RetiredJG, some good food for thought. Thank you. I'll work on re-balancing. The Real Estate is some raw land that I bought 10 years ago. It is for now sale, so when it sells, I'll move that to my Vanguard funds. I have not included my home in any of the figures. It would add ~$300K to my net worth.

I did plan to convert the IRAs to a Roth IRA starting next year when my taxes are in the 15% bracket.

My withdrawal plan is going to be $70K for 2015. I still have kids at home and their car insurance and their living expenses will push my spending needs a bit higher 2015 and 2016 and then it should drop back to ~$60K in 2017.

I don't have a plan with the annuities and am open to suggestions.

I have seen Livesoft's threads on how to be very rich and not pay a lot in tax. This is great.

I like the idea of taking the dividends in my taxable account and moving it to my cash spending account. I can then pull the remaining from TSM.

2muchfun wrote:I don't have a plan with the annuities and am open to suggestions.

I don't really have a suggestion other than don't annuitize them while you are converting tIRA to Roth IRA unless you use that income stream for your expenses. Now is not the time for extra income that does not get spent.

I'm not familiar with all the options you have with a VA and I'm not real sure how the income is taxed. I'd probably let them sit until I had all the other stuff figured out, but that may be just because I don't know much about how it works.

You didn't ask about TIPS but I suppose you put a 0 percentage in there because you are considering TIPS. People don't talk a lot about TIPS these days, but I don't see any reason why up to half your bonds could not be in a TIPS fund.